Liberia - Money

The Liberian dollar and the U.S. dollar are the 2 legal currencies and
are officially interchangeable (that is, the official
exchange rate
is L$1:US$1). However, it is not possible for the public to purchase
U.S. dollars at this rate, and in 1999 the actual exchange rate stood at
L$40:US$1. Huge volumes of capital flight (the movementof money out of
the country) after the coup in 1980 caused the government to mint new
coins to fill the resulting gap. In 1989, coins were replaced by notes,
but due to the theft of notes from the banks during the civil war, the
notes were replaced by the liberty dollar in 1992. This attempt to
restore monetary stability was also designed to undermine the position
of the rebel leaders, whose wealth was mainly in the old currency. Hence
the liberty dollars were not allowed by the rebels in rebel territory,
and old notes became illegal in government territory. During the 1997
election campaign, the successful candidate, Charles Taylor, announced
that he wanted U.S. dollars to be the only currency

Exchange rates: Liberia

Liberian dollars (L$) per US$1

Dec 2000

39.8100

2000

41.0483

1999

41.9025

1998

41.5075

1997

1.0000

1996

N/A

Note: From 1940 until December 1997, rates were based on a fixed
relationship with the US dollar; beginning in January 1998, rates
are market determined.

SOURCE:
CIA
World Factbook 2001
[ONLINE].

in Liberia, but a commission in 1998 argued that a new family of notes
and coins, which entered circulation in 2000, would allow the government
to benefit, on the new issues, from seigniorage (the situation that
occurs when increased amounts of new notes and coins are allowed to
enter circulation, allowing the issuer to make a profit to the extent
that the face value of the notes and coins is greater than their cost of
production).

In October 1999 the ineffective National Bank of Liberia was replaced by
the Central Bank of Liberia with Mr. Saleeby, the former finance
minister, at its head. The Central Bank of Liberia is pledged to a tight
monetary policy
by limiting the supply of base money to cover replacement only, and
will not lend to the government to monetize budget deficits (budget
deficits are monetized when the central bank prints money to lend to the
government to meet its budget deficit, sparking off an increase in
inflation
). Inflation in 1999 averaged 4 percent, one of the best inflation
performances in Africa.

User Contributions:

I'm a student reading economics and from my studied, i learned that inflation occurs when there is a higher rate of employment. if it is so, looking 1999, the employment rate was very low at yhe time, so what was the caused of 1999's inflation.

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